Comments on Julie Roin: “Transfer Pricing in the Courts: A Cross-Country Comparison”

Abstract

Based on a brief summary of the research question, on the methodological approach, and on the results of the paper under discussion the following comments on Julie Roin’s paper focus on two major concerns involving both methodological aspects and the expected subject of transactional profit methods. A first reservation concerns the low number of court cases which may hardly provide a reliable basis for general statements both in terms of numbers and the selected sample. This reservation results from a review of the court cases subjected to analysis and a classification of these cases by type of transaction. The second reservation concerns the expected characteristics of (one-sided) profit methods in relation to the (two-sided) profit split method. It emerges that these methods differ in more aspects than they have in common. The use of one-sided profit methods does not necessarily take place in the context of a profit split methodology and should also not be confused with replacing the arm’s length prices with a version of formulary taxation. Doubt may arise, however, whether a simple allocation of profits using one or more allocation keys is in line with the behavior of third parties dealing at arm’s length.